UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9460
LAWRENCE INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3370656
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Fifth Avenue, New York, New York 10110
(Address of principal executive offices)
(212) 944-8242
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirement
for the past 90 days: Yes X No
As of June 30, 1996, there were 14,121,482 shares of common
stock, $.01 par value, issued and outstanding. The aggregate
market value on June 30, 1996 of voting stock held by non-
affiliates of the registrant was $843,250.
Page 1 of 11
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ IN THOUSANDS)
June 30, December 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- ------------
Investments:
Fixed maturities available for sale
at fair value (Cost: 1996-$6,982;
1995-$3,875) $ 6,700 $ 3,921
Equity securities, at fair value
(Cost: 1996 and 1995-$997) 938 941
Short-term investments, at cost which
approximates fair value 5,477 11,898
Mortgage loans on real estate, at
aggregate outstanding principal balance 163 171
Other invested assets, at fair value:
(Cost: 1995-$2,437; 1995-$4) 2,437 4
------ ------
Total investments 15,715 16,935
Cash and cash equivalents 1,702 5,688
Accrued investment income 475 475
Accounts receivable (Net of allowance
for doubtful accounts of $0 in 1996
and 1995) 5,221 10,777
Reinsurance recoverable 3,982 5,690
Reinsurance receivable 4,346 5,764
Deferred policy acquisition costs 24 68
Property and equipment, net 22 23
Other assets 1,321 1,082
------ ------
Total assets $32,808 $46,502
====== ======
See accompanying notes to consolidated financial statements.
Page 2 of 11
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
($ IN THOUSANDS)
June 30, December 31,
1996 1995
(UNAUDITED) (AUDITED)
---------- ----------
Liabilities:
Reserves for losses and loss
adjustment expenses $24,934 $30,974
Unearned premiums 150 505
Reinsurance balances payable 3,169 11,526
Other liabilities 2,554 2,923
------- -------
Total liabilities 30,807 45,928
------- -------
Contingencies and commitments - -
Minority interest 656 429
--- ---
Stockholders' deficiency:
Preferred stock, $.01 par value;
2,000,000 shares authorized; no
shares outstanding - -
Common stock, $.01 par value;
20,000,000 shares authorized;
14,121,482 shares issued and
outstanding 141 141
Additional paid-in-capital 39,739 39,739
Net unrealized gains (losses)
on investments (net of deferred
income tax of $0 in 1995 and 1994) (268) (8)
Receivable from Alpha Trust (10,647) (11,004)
Accumulated deficit (27,620) (28,723)
------ ------
Total stockholders' equity 1,345 145
------ ------
Total liabilities and
stockholders' deficiency $32,808 $46,502
====== ======
See accompanying notes to consolidated financial statements.
Page 3 of 11
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Net premiums earned $ 751 $1,147 $1,907 $ 1,539
Net investment income 582 787 1,213 1,576
Realized gains (losses) on
investments (74) - 659 -
----- ----- ----- -----
Total revenues 1,259 1,934 3,779 3,115
Operating expenses:
Losses and loss
adjustment expenses 435 836 1,255 1,145
Policy acquisition expenses 118 286 364 679
Other operating expenses 412 550 872 912
----- ----- ----- -----
Total operating expenses 965 1,672 2,491 2,736
----- ----- ----- -----
Operating income (loss) 294 262 1,288 379
Equity in earnings of
non-consolidated subsidiary - (37) - -
----- ----- ----- -----
Income before income taxes 294 225 1,288 379
----- ----- ----- -----
Income tax expense (benefit) (1) (65) (15) (16)
----- ----- ----- -----
Net income before minority
interest 295 290 1,303 395
Minority interest 41 - 200 -
----- ----- ----- -----
Net income $ 254 $ 290 $1,103 $ 395
===== ===== ===== =====
Average shares outstanding 14,121 14,121 14,121 14,121
====== ====== ====== ======
Per share data:
Net income per share $0.02 $ 0.02 $0.08 $ 0.03
==== ==== ==== ====
See accompanying notes to consolidated financial statements.
Page 4 of 11
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
($ IN THOUSANDS)
Net
unreal-
Addi- ized
tional gains Receiv- Total
paid- (losses) able Accum- stock-
Com- in on from ulated holders'
mon cap- invest- Alpha def- def-
stock ital ments Trust ciency ciency
- -----------------------------------------------------------------
Balance at
1/1/96 $141 $39,739 $ (8) $(11,004) $(28,723) $ 145
Net income - - - - 1,103 1,103
Change in
receivable
from Alpha
Trust - - - 357 - 357
Change in
net
unreal-
ized
gains
(losses) - - (260) - - (260)
--- ------ ------ ------ ------ ------
Balance at
6/30/96 $141 $39,739 $ (268) $(10,647) $(27,620) $ 1,345
=== ====== ===== ====== ====== ======
See accompanying notes to consolidated financial statements.
Page 5 of 11
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED JUNE 30,
($ IN THOUSANDS)
1996 1995
---- ----
Net cash and cash equivalents
(used) by operating activities $ (5,988) $(4,685)
Investing activities:
Proceeds on redemptions
of long-term investments:
Fixed maturities available for sale 734 3,255
Other 10 470
Proceeds on sale of fixed maturities
available for sale 1,636 -
Proceeds on sale of equity securities 739 -
Purchase of long-term investments:
Fixed maturities available for sale (5,556) (688)
Other (2,435) -
(Increase) decrease in short-term
investments 6,420 488
----- ------
Net cash and cash equivalents
provided or (used) by
investing activities 1,548 3,525
----- ------
Financing activities:
Receivable from Alpha Trust 454 -
----- ------
Increase (decrease) in cash
and cash equivalents (3,986) (1,160)
Cash and cash equivalents-beginning
of period 5,688 2,500
----- ------
Cash and cash equivalents-end
of period $1,702 $ 1,340
===== ======
Supplemental disclosure of cash
flow information:
Cash paid during period for
income taxes $ - $ -
Interest expense paid - -
See accompanying notes to consolidated financial statements.
Page 6 of 11
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
- --------------
NOTE 1 - GENERAL
Lawrence Insurance Group, Inc. (the Company or LIG) was
incorporated in Delaware on June 30, 1986, as an insurance
holding company which is presently 93% owned by Lawrence Group,
Inc. (Lawrence Group).
Subsidiaries of the Company include United Republic Insurance
Company (URIC), Global Insurance Company (Global), Senate Insurance
Company (Senate), Senate National Life Insurance Company (SNLIC),
and Senate Syndicate, Inc. (Syndicate). Senate and Global are
wholly owned subsidiaries of URIC. SNLIC is a wholly owned
subsidiary of Senate. United Community Insurance Company (UCIC) is
no longer considered a subsidiary of the Company as a result of the
Order of Rehabilitation issued on July 7, 1994 which transferred
management and control to the New York Insurance Department
(NYID) and the subsequent Order of Liquidation entered on
November 10, 1995 by the New York Supreme Court, Schenectady
County.
(a) BASIS OF PRESENTATION
The consolidated financial statements for 1996 and 1995,
include the accounts of LIG and all of its wholly owned
subsidiaries (collectively, the Company) except as noted below.
On July 7, 1994, UCIC, with the consent of UCIC management, was
placed in Rehabilitation by court order. Consequently, LIG
management no longer exercises any decision making authority
or control over UCIC. These functions are the responsibility of
the New York Insurance Department (NYID). As a result of this loss
of control, the Company has included the financial results of UCIC
only through the date of the Order of Rehabilitation and then on an
unconsolidated basis. ie. results of operations are reflected as
"Equity in earnings (loss) of non-consolidated subsidiary" and the
Company's investment as "Deficit of non-consolidated subsidiary".
As a result of the Order of Liquidation, UCIC's 21.4% ownership
of URIC which had been included in the accounts described above, is
now included as "Minority interest."
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. While the
Company reported net income of $1,103,000 for the six months ended
June 30, 1996, liquidity for the parent company is weakened and is
expected to remain in that condition for the foreseeable future.
In addition, as a condition of its release from confidential
supervision on August 25, 1995, URIC was to achieve
Page 7 of 11
<PAGE>
certain financial goals, including a statutory surplus of $8.0
million by December 31, 1995. It reported a statutory surplus of
$6.6 million as of that date. The statutory surplus as of June 30,
1996 is $8.1 million, an amount which does not record the effect of
approximately $4.0 million in loss and loss adjustment expense
(LAE) arising from an reinsurance pooling agreement with UCIC which
is the subject of disagreement between URIC and UCIC. The
accompanying balance sheets do record the effect of the additional
$4.0 million in loss and LAE and assumes that the Texas Department
of Insurance will not place URIC into conservatorship. If it
should do so, URIC would be accounted for as a non-consolidated
subsidiary. The financial statements do not reflect any
adjustments necessary to reflect such an event.
The accompanying consolidated financial statements are
presented in accordance with generally accepted accounting
principles, and in the opinion of Management, reflect all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and
results of operations for the interim periods. Results of
interim periods are not necessarily indicative of results for the
full year.
These consolidated financial statements should be read in
conjunction with the following notes and with the Notes to
Consolidated Financial Statements included in the Company's Form
10-K for the year ended December 31, 1995.
(b) CASH AND CASH EQUIVALENTS
The Company considers cash to be funds held in checking and
money market accounts. Non-negotiable certificates of deposit
are considered to be cash equivalents.
(c) PER SHARE DATA
Net income per share is calculated by dividing net income by
the weighted average number of common shares outstanding during
the period.
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
As discussed in Note 1, UCIC has been placed under the
control and management of the NYID and as a consequence, has not
been consolidated with the Company's results. The operating
results which includes UCIC's share of URIC's operations for the
Page 8 of 11
<PAGE>
1995 periods are included in "Equity in earnings (loss) of
non-consolidated subsidiary", based upon the equity method of
accounting. Subsequent to November 10, 1995, UCIC's share of
URIC's results are included in "Minority interest".
URIC and Global voluntarily ceased writing new and renewal
business during the first quarter of 1994 and the fourth quarter
of 1993, respectively. Earned premiums and associated losses and
expenses for these subsidiaries, relate primarily to business
generated prior to 1994.
Earned premium decreased approximately $396,000 reflecting
primarily a decrease in Senate's premiums earned.
Investment income decreased by $204,000 due to the impact of
lower average invested assets.
Realized losses represents a loss from the disposition of
fixed investments.
Loss and LAE decreased by $401,000. This decrease was related
to lower levels of business and favorable adjustments to several
reinsurance agreements compared with 1995.
Policy acquisition expenses decreased by $168,000 due to lower
levels of premiums earned and the fact that 1995 was adversely
impacted by commission adjustments on reinsurance assumed.
Operating expenses decreased by $138,000 with the change
attributable largely to a reduction in costs associated with
defending the Company's subsidiaries in disputes with state
insurance departments compared with 1995.
Equity in loss of non-consolidated subsidiary was $37,000
representing UCIC's minority interest in URIC for 1995. For 1996,
this is reflected as minority interest and totaled $42,000.
Income tax expense for 1996 represents state income taxes as
the Company, which files a consolidated federal return, has a NOL
carryforward. For 1995 there was a favorable adjustment.
As a result of the above, the Company recorded net income of
$254,000 for the three months ended June 30, 1996 compared with net
income of $290,000 for the same period in 1995.
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Earned premium increased approximately $368,000 reflecting
primarily a favorable adjustments in URIC's retrospectively
rated premiums compared with 1995 when the adjustments were
Page 9 of 11
<PAGE>
negative partially offset by lower premiums earned at Senate. The
increase URIC's premium was partially offset by higher loss and LAE
related to these contracts.
Investment income decreased by $363,000 due to the impact of
lower average invested assets.
Realized gains represents a gain on the disposition of the
company's investment in equity securities partially offset by a
loss from the disposition of fixed investments.
Loss and LAE increased by $110,000. This increase was offset
by adjustments to premiums earned.
Policy acquisition expenses decreased by $315,000 as a result
of lower premium levels at Senate in 1996 and commission
adjustments on reinsurance assumed in 1995.
Operating expenses decreased by $40,000 with the decrease
attributable largely to the tapering off of costs associated with
defending the Company's subsidiaries in disputes with state
insurance departments and partially offset by market development
costs associated with the Company's plans to resume writing
business in Global and URIC.
Equity in earnings of non-consolidated subsidiary was
$0 representing UCIC's minority interest in URIC for 1995.
For 1996, this is reflected as minority interest and totaled
$201,000.
Income tax expense for 1996 represents state income taxes as
the Company, which files a consolidated federal return, has a NOL
carryforward.
As a result of the above, the Company recorded net income of
$1,103,000 for the six months ended June 30, 1996 compared with net
income of $395,000 for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
AS OF JUNE 30, 1996
For the six months ended June 30, 1996, the Company used cash
for operations of $5,988,000. The significant use of cash was
attributable largely to the commutation and settlement of several
large reinsurance contracts during the period. These commutations
had a favorable impact on 1995 and 1996 operations. It is not
expected that this level of cash outflows will continue although to
the extent that URIC and Global continue in a run off situation, it
is likely that operations will be partially funded by proceeds from
the disposition of investments. For the second quarter cash
generated from operations was positive. Cash generated from
Page 10 of 11
<PAGE>
investing totaled $1,548,000 during the six months. Maturing short
term investments were reinvested in part in longer term securities
and an advance of $2,250,000 related to the purchase of real
estate. Cash received from financing activities was $454,000
representing scheduled receipts from Alpha Trust.
The parent Company obtained the majority of its cash from
dividends paid by its insurance subsidiaries. Due to
regulatory restrictions, there are no dividends that can be paid to
the parent at this time. It is anticipated that URIC will be able
to meet its projected cash requirements as will the subsidiaries
owned by URIC.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May
23, 1996. The following persons were elected to the Company's
Board of Directors to hold office for the ensuing year.
In favor Withheld Abstained
Rita E. Harfield 13,611,233 30,036
Randall J. Ezick 13,618,380 22,889
Nevin D. Harkness 13,615,041 26,228
Albert F. Kilts 13,617,340 23,929
Milos R. Knorr 13,618,230 23,039
Albert W. Lawrence 13,616,997 24,272
William J. Mather 13,612,293 28,976
SIGNATURES
JUNE 30, 1996
_____________________________
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LAWRENCE INSURANCE GROUP, INC.
/s/ ALBERT W. LAWRENCE
-----------------------------------------
Albert W. Lawrence, Chairman of the Board
/s/ ALBERT F. KILTS
---------------------------------
Albert F. Kilts, President
/s/ FLOYD N. ADAMS
--------------------------
Floyd N. Adams, Treasurer
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from Lawrence
Insurance Group, Inc.'s consolidated financial statements as of and for the
six months ended June 30, 1996 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000805266
<NAME> LAWRENCE INSURANCE GROUP, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 6,700
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 938
<MORTGAGE> 163
<REAL-ESTATE> 0
<TOTAL-INVEST> 15,715
<CASH> 1,702
<RECOVER-REINSURE> 3,982
<DEFERRED-ACQUISITION> 24
<TOTAL-ASSETS> 32,808
<POLICY-LOSSES> 24,934
<UNEARNED-PREMIUMS> 150
<POLICY-OTHER> 0
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<NOTES-PAYABLE> 300
<COMMON> 141
0
0
<OTHER-SE> 1,204
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1,907
<INVESTMENT-INCOME> 1,213
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<EPS-PRIMARY> .08
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</TABLE>
